The Silicon Valley stereotype is one of rugged American individualism and Darwinian survival: the brilliant inventor who risks it all to build a billion dollar company from a parent’s garage or a college dorm room. Outside-the-box thinking and self-reliance are viewed as fundamental to the Valley’s ethos, driving forward the American economy one ground-breaking innovation at a time. Like most stereotypes, there’s a core of truth: Bill Hewlett and Dave Packard really didbuild HP from scratch in a Palo Alto garage.

However, it’s not innovation that sets Silicon Valley apart from other centers of technological development—it’s a willingness to iterate. After all, even Hewlett and Packard, the spiritual godfathers of the Valley, got their start building audio oscillators for Disney, a technology that was first developed more than 40 years before. More recently, well-established tech companies have spun out start-ups such as Quora, leveraging both human capital and product development experience to improve execution on pre-existing concepts. In Quora’s case, the founders were not the first to build an internet answers site (Ask Jeeves in 1996, Yahoo Answers in 2005), but instead were able to draw from their experience working at Facebook to apply a Facebook-style user interface to the well-trodden Q&A format.

Silicon Valley from afar. (Photo credit: Wikipedia)

Perhaps the key lesson from the Valley’s rise and continued prominence as a global epicenter of creative output is that innovation does not occur in a vacuum; rather it’s the result of generations of product iterations and failures that are eventually reorganized and recycled into the framework for a successful new product or company.

Shockley’s “Traitorous Eight” were the Valley’s Earliest and Most Successful Iterators

The story of William Shockley and the transistor is particularly emblematic of Silicon Valley’s role as an idea and talent aggregator rather than pure technological innovator. Shockley was originally employed by Bell Labs, a subsidiary of the AT&T telecommunications monopoly and the most successful industrial laboratory of the 20th century. (7 Nobel prizes have been awarded for work performed at Bell). As narrated in Jon Gertner’s The Idea Factory, the idea for the transistor arose out of cooperation/competition between Shockley and his fellow team members at Bell. After being awarded the Nobel for their work, Shockley left Bell to form his own company in Silicon Valley—Shockley Semiconductor Laboratory—intending to commercialize the transistor. Shockley’s lab would fail, but spun off a sister company called Fairchild semiconductor, consisting of the infamous “traitorous eight” who defected in protest of Shockley’s abrasive management style. Fairchild's founders would eventually found successful semiconductor companies of their own, including the now well-known Intel and Advanced Micro Devices, as well as the VC fund Kleiner Perkins Caufield & Byers, which funded countless others.

We tend to think of seminal innovations in the Valley’s history, such as the release of the Apple II personal computer in 1977, as proverbial lightbulb moments. Yet the truth behind a device like the Apple II isn’t Steve Jobs and Steve Wozniak as transcendent inventors, but a culmination of 30 years of iterative product development and failure in the highly complementary transistor industry—for example, the pair’s influential visit to Douglas Engelbart’s lab at Stanford Research Institute where they first glimpsed a Graphical User Interface (GUI) and the mouse. In these cases, Silicon Valley provided a perfect combination of iterative know-how and geographical proximity to powerful networks and researchers.

How Farmville Hit it Big

A more recent example of iteration triumphing over innovation is Zynga gaming hit, Farmville. The concept for Farmville was based on a Japanese farming simulation game called Harvest Moon, first released for Super Nintendo in 1996. Later, in 2008, the social network based farm game Happy Farm was released by developer 5 Minutes on the Tencent QQ platform. Borrowing heavily from these previous iterations, Zynga released Farmville in 2009. As noted by Mark Skaggs, VP of Product Development for Zynga, the team’s original idea was to make a real time strategy (RTS) game for Facebook. Skaggs describes the development process, another key aspect of the game which built on previous infrastructure, as follows:

We had multiple teams working on multiple titles at our company, and we simply grabbed pieces of code from other teams in the interest of shipping the game quickly. For example, our avatar creator was borrowed from YoVille. We’ve got pieces from the Mafia Wars team, the Poker team. Behind the scenes, a lot of the server code—transaction infrastructure, those kinds of technologies we were able to leverage from other teams as well.

Farmville was not unique in its idea, but was unique in its ability to execute, simply and elegantly, the well-trodden territory of a resource accumulation game. As with Shockley’s transistor, iterations rather than innovations significantly accelerated the development process, leading to a successful product release.

The Sharing Economy’s Iterative Winners

For many start-ups, the confluence of iterative product development and sound execution leads to success—not the initial idea. As James Hong, co-founder of Hot or Not and an angel investor, said to me, “Winners in Silicon Valley are not necessarily more innovative, but they are the ones that execute.”

For example, the company AirBnB was not the first online short-term housing rental service. Among others, VRBO launched in 1996 (which Homeaway acquired in 2006), Couchsurfing.orglaunched in 1999, and Craigslist had a long history of matching apartment renters with sub lessors. However, AirBnB was successful, not because of the tweaked idea (a network of bed and breakfasts), but rather, because of a series of small iterations, from a well-designed interface, to a low-barrier of entry that opened up a new ‘passive’ marketplace, to a system of accountability that forced rapid responses to solve the asymmetry problem that continues to plague sites such as Craigslist. By incorporating user reviews, profiles, and an in-house private messaging system, buyers and sellers are able to match more efficiently without having to do extensive background work and diligence on potential customers/apartment owners. AirBnB’s success is therefore intimately tied to social networking, drawing heavily upon the dual influences of Facebook-style personal profiles and degrees of separation to Ebay-style approval ratings. In this sense, AirBnB was not only iterative in its business model, but also in its implementation.